Medicaid Work Requirements and Income Caps Threaten Disabled Beneficiaries

The One Big Beautiful Bill Act (H.R. 1) requires Medicaid enrollees ages 19-64 to document at least 80 hours per month of employment, education or volunteer service to keep coverage. CMS issued an interim final rule in June tightening the medical-frailty exemption, demanding proof that a condition prevents meeting the threshold. Beginning early 2027, states must enforce the rule; eight states—including Iowa, Arkansas, Idaho, Indiana, North Carolina, North Dakota, Ohio and Utah—have already adopted stricter statutes.

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Medicaid “buy-in” programs, created in the 1990s, let working disabled adults pay a portion of income to retain benefits. Iowa was an early adopter; as of late January, 11,640 Iowans participated, representing 1.7 % of the state’s Medicaid rolls. Income caps rose to $39,900 for a single household in 2024, with an asset limit of $12,000. Critics say caps force beneficiaries to choose between higher earnings and health coverage.

NPR

• About 21 million people gained Medicaid eligibility through the ACA and are now subject to the work requirement.

Politico

• CMS projects 3.1-3.3 million annual disenrollments; the CBO estimates 5.7 million.

Brookings Institute

• Analysts expect at least 5 million losses over a decade.

Brookings Institute

• In Iowa, Erica Carter earned $110,000 annually—well above the $36,450 2023 limit for disabled workers—yet relied on the buy-in program. After a Medicaid notice, she left the program and incurred $35,000 in out-of-pocket disability costs.

NPR

Alice Burns, associate director of KFF’s Program on Medicaid and the Uninsured, warned that buy-in premiums are far below projected costs of covering participants. Daniel Van Sant, director of disability policy at The Harkin Institute, argued that higher employment could boost state tax revenue and help beneficiaries transition off other assistance programs.

NPR

A coalition of 47 Democratic senators urged CMS to withdraw the interim rule, describing it as “a bureaucratic maze” that would strip coverage from people unable to navigate complex documentation. Brookings scholars said CMS’s regulatory impact analysis relies on invented assumptions, inflating projected savings while underestimating coverage loss and health harms.

Brookings Institute

CMS assumes one-third of affected beneficiaries will become “community-engaged,” exceeding the highest empirical estimate from welfare-to-work research (under 5 %). The CBO’s projection of 5.7 million disenrollments suggests a much larger impact. Neither analysis includes the cost of additional state IT upgrades—estimated at $700 million—nor the $200 million federal funding currently allocated.

Brookings Institute

States are upgrading eligibility systems. Arkansas began automated exemption checks on July 1, while New York is using its health-insurance marketplace for income verification. Kentucky and Utah have passed data-sharing laws to support compliance. As early 2027 approaches, policymakers anticipate federal recoupments for error rates above 3 % and a projected rise in uninsured individuals that could reach 7.5 million by 2034 if cuts proceed. Stakeholders continue to lobby for either a repeal of the work-requirement provisions or a redesign that preserves Medicaid’s safety-net function for disabled Americans.

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